Law Decree of 21 June 2013 No. 69

Important changes to the tax and incentive regime applicable to renewable energy plants were introduced by Article 5 of Law Decree of 21 June 2013 No. 69 (the ”Law Decree”), which was passed by the Italian Council of Ministers as the “Decreto del Fare” (“Decree of Doing”), and published in the Official Gazette of the Italian Republic on 21 June 2013. It entered into force on 22 June 2013.

Under Article 77 of the Italian Constitution, a law decree becomes ineffective 60 days after the date of publication in the Official Gazette, unless it is converted into law by the Parliament. When converting into law, Parliament may also make amendments to the law decree, provided that a law decree that is not converted into law retains its validity limited to the 60‑day period.

Robin Hood Tax extension

An additional surcharge to the “IRES” corporate income tax (better known as the “Robin Hood Tax”) is payable by energy companies with revenues over €10m and taxable profit of more than €1m. This is pursuant to paragraph 16 of Article 81 of Law Decree of 25 June 2008 No. 112, converted into Law 6 August 2008 No. 133.

Law Decree no. 138/2011 (the Mid- August measure) sets out certain significant changes to the corporate income tax surcharge for the energy industry (the so-called “Robin Hood Tax”).

The Robin Hood Tax applies to the solar and wind farm business if the following thresholds are both exceeded in the previous fiscal year:

-          EUR10 million of gross revenues

-          EUR1 million of corporate income tax base.

Such surcharge applies to companies involved in the following business activities:

-          transmission and distribution of electricity

-          transportation and distribution of gas

-          production of renewable energy (biomass, photovoltaic, wind).

The rate of the surcharge has been increased by 4 percent (i.e. from 6.5 percent to 10.5 percent) for fiscal years 2011, 2012 and 2013. As a result, the aggregate Corporate Income Tax rate which was applicable to companies involved in the energy business and was originally at 34 percent (27.5 percent plus 6.5 percent) starting from fiscal year 2009, is now fixed at 38 percent (27.5 percent plus 10.5 percent) for years 2011, 2012 and 2013.

In article 5 of the recent Law Decree, paragraph 1 reduces the relevant Robin Hood Tax thresholds to include those energy companies with yearly revenues of more than €3m and taxable profit of at least €300,000.

For the year 2013, the Robin Hood Tax shall be applied as a 10.5% rate increase on the tax base. It is expected to decrease to 6.5% for the year 2014.

The Robin Hood Tax extension, which could potentially affect renewable energy plants with capacity starting as low as 300 kW, has been driven by a desire to reduce utility bills and other energy‑related costs for consumers.

However, a closer inspection of Article 5 of the Law Decree reveals that it is unlikely that more than a fraction of the anticipated revenues will be used to reduce the “A2” component (i.e. the costs associated with dismantlement of nuclear plants and the disposal of waste), whilst the greater share of revenues may be used for other purposes, which are not necessarily energy‑related.